STRATEGY OF COMPETITIVENESS OF UREA INDUSTRY …eajournals.org/wp-content/uploads/Strategy-of-Competitiveness-of... · STRATEGY OF COMPETITIVENESS OF UREA INDUSTRY IN THE INTERNATIONAL

International Journal of Business and Management Reveiew

Vol.2, No.5, pp.14-30, October 2014

Published by European Centre for Research Training and Development UK (www.eajournals.org)

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ISSN: 2052-6393(Print), ISSN: 2052-6407(Online)

STRATEGY OF COMPETITIVENESS OF UREA INDUSTRY IN THE INTERNATIONAL MARKET AND ITS IMPLICATION TOWARD THE DEVELOPMENT OF UREA INDUSTRY IN INDONESIA

Subhan

Graduate School of Management and Business

Bogor Agricultural University, Indonesia. Email : [email protected]

Ujang Sumarwan



Arief Daryanto



Kirbrandoko



ABSTRACT : The aim of research is to find out and analyze the variable influencing the competitiveness

and the strategy to increase the competitiveness and to formulate the competitiveness model of urea industry

in the international market. The problems face by the urea industry are the gas raw material, the old plant,

the old technology and the domestic selling price policy. The price policy (domestic price and export price)

and the distribution policy (production volume and export volume) are significantly influencing the income

and the profit of company and will be influencing toward the competitiveness. The insignificant domestic

price influences the selling price (income) and the domestic policy of price regulation which is the same as

the export price that will increase the income and the competitiveness. Research design is a case study,

during the period Dec 2013 to June 2014 and analysis of the factors that influence the competitiveness by

multiple linear regression, market structure analysis using the Herfindahl index and concentration ratio

(CR4), Comparative advantage using the Revealed Comparative Advantage (RCA) and SWOT analysis,

competitive advantage using Porter Diamond theory and to develop the strategy and model of

competitiveness, it is used the Analytic Network Process (ANP). The analysis result of the Structure of Urea

Market tends to the direction of Oligopoly with the moderate concentration level shown with the average

value of Herfindahl Index of 0.0808 and the value of CR4 45.01 %. The Urea Industry of Indonesia has the

comparative advantage is shown by the value of Revealed Comparative Advantage (RCA) of 2.07 which is

higher than from China as the main competitor in Asia. The analysis result of competitive advantage of

Porter’s Diamond Theory is that as a whole the attributes of resource and domestic demand have the

competitive advantage. The support and government and the opportunity factor help the forming of

competitive advantage. From the SWOT Matrix, the position of urea industry on Indonesia is in the

quadrant II (Stability) having the opportunity and the big market strength. The strategy priority of the

analysis of ANP is the development of technology, then the development of export market, the change of

subsidy regulation and the strategy of the business communitcation with the other urea producer

country.The research showed the need of revitalization of urea industry with the development of technology,

market development and business communication with urea producer countries to increase competitiveness

in the international market.

KEYWORDS : Price policy, Market structure, Competitiveness, Comparative and Competitive

Advantage, RCA, Porter’s Diamond, SWOT, Analytic Network Process (ANP).

http://www.eajournals.org/




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INTRODUCTION

The research about competitiveness is essential to measure strength in market competition and, in

fact, there has been many studies conducting such an experiment. Pristia (2007) conducted an

analysis about the cement industry rivalry using Revealed Comparative Advantage (RCA) method,

the result indicated that the cement industry in Indonesia has a strong competitiveness in the

international/global market. Riza (2009) conducted an analysis regarding the competitiveness of

the Indonesian cocoa industries using the RCA method to analyze competitiveness and Porter’s

Diamond showed that the Indonesian cocoa industries still lack competence. Dwinata (2008) did

a research about the competitiveness of Crude Palm Oil Industries in Indonesia at the international

market. The outcome of his research indicated that generally most attributes such as resources and

condition regarding domestic demand have their own competitive advantage. Other studies include

competition among pulp industries and agricultural commodities (Wartono 1999, Sandaya 1998,

Sukmawati 1999). Previously, no one has been reviewing the competitiveness of urea industry.

The study of the urea industry competitiveness is very important because the problem facing the

industry urea can causes was not optimal profits. Problems faced by the fertilizer industry amongst

all: the difficulty to get the guarantee of gas raw material, the age of old plant and the technology

used is still the old technology so the consumption of gas raw material is still high and the policy

of domestic selling price is causing the loss of opportunity to get profit. Indonesia is the biggest

urea producer in ASEAN with the disharged capacity of 7,284,000 ton. In 2012 the total urea

production is of 6,851,000 ton or 94 % from the production capacity, while the allocation for

subsidy is of 4,100,000 ton (Ministry of Agriculture of RI, 2011), for domestic plantation and

industry it is of 1,724,000 ton and the remained production of 1,027,000 ton is exported. With the

finished of new factory development in 2014, the production will be added of 1,000,000 ton and

the export potential will also be added into 2,000,000 ton which will color the competitive map of

the production business of the fertilizer industry in the international market. With such market

condition, the urea producer countries will compete to export the products so that the fertilizer

industry of Indonesia should increase its competitiveness.

Urea industry includes in the processing industry sector giving the main contribution toward the

Gross Domestic Product (PDB) after the sectors of Agriculture, Forestry, Fishery and Mining (BPS

2012). In the processing industry, the oil and natural gas industry contributes 15 % and non oil and

natural gas industry of 85 %. In the group of non oil and natural gas processing industry, the group

of fertilizer industry occupies no 1 order from 9 industrial groups having opportunity to produce

the country’s foreign exchange.

Research Problem

The competitiveness of an industry or a Country refers to the ability of productivity of the industry

or the Country (Kotabe, 2000). If a company has the strong competitiveness so it can create the

superiority to compete of the company among the competitors, so the company can survive in a

certain term by getting the sufficient profit. The problems faced the fertilizer industry in Indonesia

which are very basic namely the first is the availability the natural gas. The second problem faced

by the fertilizer industry is the age of plant which is already old, and the technology is still using





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the old technology so that the consumption of gas is high. Other problem is the policy of selling

price for subsidywith the determination of very low.

From the above explanation of problems, what to be studied and analyzed are:

1. Is the urea industry of Indonesia having the comparative advantage and the competitive

advantage ?

2. What strategy is needed to strengthen the competitiveness of urea industry of Indonesia in the

international market?

3. How is the model of competitiveness of the urea industry of Indonesia in the international

market?

Research Purpose

Based on the background and problem identification above, the purpose of research is to find out

and analyze the influence of :

1. To analyze the comparative and competitive advantage of the urea industry of Indonesia in the

international market.

2. To formulate the strategy to strengthen the competitiveness of the urea industry of Indonesia in

the international market.

3. To formulate the model of competitiveness of the national urea industry in the international

market.

Scope of Research

This research will be held for 6 months. The stage of research covers the collection of primary data

and secondary data, the evaluation and selection of data, the analysis of data, continued by the

discussion and reporting of research result. The primary data for the need of analysis of ANP are

obtained from conducting the interview with the representative expert of the fertilizing issue in

Indonesia (Ministries of Agriculture, Industry, Trade, Ministries Coordinator of Economy, PT

Pupuk Indonesia, Indonesian Fertilizer Producer Assosiation and Representatives of farmer)

LITERATURE REVIEW

Concept of Competitiveness

The competition of business world at the moment requires the company to see further ahead to

anticipate various possibilities that can influence the development of company (Krishnan 2011).

To win the competition in the market is based on three important thingsnamely the product sold

has a good quality, the selling price is under the market price and the type follows the model that

always develops (Julian 2003).

Comparative Advantage

The term of competitiveness is begun with the concept of comparative advantage from Ricardo in

the 18th century, stated that a country will obtain the benefit from the trade with other country if

the country can produce the goods more efficiently. Porter (1990) conveyed the concept of

competitive advantage as the form of perfecting of the comparative advantage concept where there

were five important factor achiving the competitive advantage known as the contributor on the

innovation activity namely new technologies, new or shifting buyer needs, emerge of the new

industrial segmen, shifting input cost or availability, changes in government regulation. According





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to Warr (1994) the comparative advantage and the competitive advantage were in the position

which equipped each other and can formed the basic for developing the competitive advantage

(Khemani 1997). While according to Ortmann (2000) the comparative advantage explained how

the trade could give the benefit for the country by the way to use the natural resources which were

more efficient when the trade became very limited.

Competitive Advantage

The concept of competitive advantage according to Day and Wensley (1988) focused on the

superior skill and or the superior resources. Then according to Grant (1995) the competitive

advantage was the capability to exceed the competitos on the main target from a performance of

company namely profitability and market share. So that the indicator of competitive advantage

which is the most popular is Market Share and Profitability( Jacobson and Aaker 1985 ;

Szymansky et.al.1993). The competitive advantage is meant by Pass and Lowes (1994) as the

ownership of the company on various assets with the characteristics giving the advantage toward

the competitors. The analysis of competitive advantage can be used as tool in measuring the private

advantage that the economic activity measured with the market price and the valid exchange value.

The factors determining the competitive advantare of a national industry are resource condition,

demand condition, supporting condition and related to competition, structure, and strategy of

company (Porter 1990). The attributes supported by the role of opportunity and the role of

government together with forming a system known by the National Diamond System.

Measurement of Competitiveness

To analyze the comparative advantage it is often used by RCA (Revealed Comparative Advantage)

method.RCA is the index measuring the export performance of a commodity from a country by

evaluating the role of export of a commodity in the total export of the country, compared to the

commodity segment in the world trade (Ballasa 1989). The index of RCA is the indicator which

can show the change of comparative advantage or the change of industrial competitiveness level

of a country in the global market.

Model of Competitiveness

1. Model of Generic Competition Strategy from Porter

The competitive advantage of a company in an industry is determined by the reach of its

competition. If the strategy of low cost and differentiation fulfills the wide target market, the

strategy is known by the cost leadership and differentiation.

2. Diamond Porter’s Model

This model consists of main attributes from a Country formed like diamond explaining the factors

that determine the company’s advantage in the dominant global industry related to the Country or

certain regional environment. The first dimension from this model is the production factor (factor

condition) which is the input needed for competing in every industry. The second dimension is the

demand conditions, marked by the characteristic and measurement from the need of buyers in the

host market for goods and industrial services. The third dimension is represented by the related

and supporting industries and the fourth dimension is strategyi, structure and competition of

company to determine the growth of certain industry.





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3. Model 9 ofInternational Competitiveness Factor (Dong-Sung Cho)

According to Dong-Sung Cho it is necessary to have a model which can show not only as much

as the level of resource had by a Country, but who can create the resource and when should the

resources be created. The difference of model developed is located on the factor outside the

diamond box covering manpower, bureaucracy and politician, entrepreneurship and manager,

technician and professional designer and the factor of access and opportunity in conducting

something for the community

4. Company’s Competition Model

In order that the company’s business has the uniqueness of competitiveness, the company needs

to form the model of competition wanted as the attempt to create the continuity of company’s

competitiveness. Grunert (2000) developed a model of company’s competition that can be made

the reference in the research among the companies which have marketed their products in the

international market.

Previous research on Competitiveness.

The various study use of ANP can be utilize to formulate suitable model for competitiveness of

urea industry. The advantage of using ANP especially for observing the relationship between

clusters model.The ANP method is used to view upon the relationship between stakeholders in

order to design a strategic model competitiveness of urea industry, which was obtained from depth

interview with the urea industry experts. Factors affecting urea products along with the problems

and solutions using were discussed with the experts in order to design strategic model framework

for the urea industries using Analytic Network Processes (ANP).

Sandaya (1998) studied competitiveness in shrimp and tuna industries using Porter’s Five Model

Competitiveness analysis, Analytical Hierarchy Process (AHP) and Analytical Network Process

(ANP), The Internal Factors Evaluation (IFE) Matrix and The External Factors Evaluation (EFE)

Matrix. The outcome showed that both shrimp and tuna industries have similar IFE and EFE scores

and strategic model of shrimp and tuna competition in Indonesia. According to Li-Hua and Simon

(2007) it is important to know how far Chinese companies are able to compete with other

companies operating in China, and which marketing strategy needs to be enhanced by evaluating

the importance of corporate rivalries, knowing the competition using Diamond Porter model with

Analytical Network Process (ANP). The end result is the importance on how Chinese companies

can develop innovation system and technology in order to compete in the global rivalry. And then

Sledge (2005) conducted a research using Diamond Porter model that connects international

competition with global competitiveness on the automobile production. The strategies’ priority

uses Analytical Hierarchy Process (AHP) and Analytical Network Process (ANP). Initial

framework ANP models urea product competitiveness in the international market used as a basis

for depth interviews with experts is as figure 1.

Research competitiveness of urea industry in Indonesia is expected to improve the urea business

and make a positive contribution to all stakeholders and the environment.





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Picture 1. Initial Framework Model Urea Industry Competitiveness

The Results of previous research on competitiveness summarized as follows :

a. Competition models used in research in general use Diamond Porter and Porter Five’s Model

Competitiveness and some research combaining analysis model Diamond Porter, SWOT

matrixs and BCG matrixs.

b. Other models used are development of the model Diamond Porter that Double Diamond Porter

are applied to the study of manufacturing in Korea.

c. The measurement of competitiveness in general use RCA, RCA#, Market Share, Net Export

Index.

d. To determine a strategy for competing priorities, some research using Analytical Network

Process (ANP) and Analytical Hierarchy Process (AHP)

METHOD

Time and Activity of Research

This research was conducted for 6 months, and started in the month of December 2013. As a whole,

the research activity starting from the data collection to the result during the period of December

2013 to June 2014.

Research Design

The research design was case study which analysis in-dept and detail the urea industry in

Indonesia. This research has been conducted in Jakarta and time frame for research was over

Sales Policy Pricing Policy Subsidy Policy

Su

bsi

dy P

aym

ent

Mar

gin

Cal

cula

tion

Vo

lum

e o

f U

rea

Su

bsi

dy





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seventh months from December 2013 – June 2014. Respondents or expert of this research selected

based on their expertise in the urea industry, asa ell as their involvement as a stakeholder in the

urea industry. Primary data sampling has been done by in-depth interview and structured

questionnaires with selected expert. Designing of urea industrial strategy model used Analytical

Network Process (ANP).

The main exporter countries taken as the sample are Russia, Ukraine, Egypt, Iran, Kuwait, Oman,

Qatar, Saudi Arabia, China, Malaysia, Indonesia, Canada and Venezuela. While the main importer

countries are India, Bangladesh, South Korea, Thailand, Philipine, Australia, New Zealand, USA,

Brazil and Mexico.

Data Colletion Technique

The data collection source from the secondary data of Statistic Bureau (BPS), Ministry of Trade,

Ministry of Agriculture, Bank Central Indonesia and statement from the mass media and from the

internal company of BUMN fertilizer, international publication published by the world fertilizer

magazine.While the primary data for the need of analysis by doing the depth interview with the

experts respondents are amongst all:

1. Directorat General of Infrastructre and Agricultural, Ministry of Agriculture

2. Directorat General of Food Crops, Ministry of Agriculture

3. Derector General of Foreign Trade

4. Directorat General of Manufacture Industry, Ministry of Industry

5. Deputy of Coordinating for Comerce and Enterpreneurship, Ministry Coordinating Economy

6. President Director of PT.Pupuk Indonesia (Persero)

7. Secretary General of Asosiasi Produsen Pupuk Indonesia.

8. Representative Farmers (KTNA)

Technique and Data Analysis

The competitiveness model framework was designed with Analytic Network Process (ANP) and

then further consulted with the expert stakeholders. Afterwards the framework is reconfirmed by

expert stakeholders through depth interview and then cluster relationship is constructed within the

ANP framework. The ANP model was then made into a pairwise comparison toward constructed

and analyzed nodes using Super Decision Software. Advantages in using ANP is comprehenship

technique allows to input all of the relevant criteria and allows more complex relationship between

levels and attributes (Saaty 2003). The general framework that will be discussed with expert

stakeholders is the initial feedback network that consists of 5 clusters is as follows: goals, aspects,

problems, solutions, and strategies. The aspects that will be the initial framework is the most

influential. The most influential aspect on competitiveness of urea industries is pricing policy,

distribution policy, and subsidy policy.

RESULT AND DISCUSSION

Analysis of Comparative Advantage Comparative advantage of the urea fertilizer industry of Indonesia in the international market is

measured using Revealed Comparative Advantage(RCA) to compare the position of





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competitiveness of Indonesia with other urea exporter countries. The result of calculation of the

average value of RCA of the urea exporter countries in 2003-2012 is as follows:

Picture 2. RCA of Urea Exporter Countries 2003-2012

The countries of Ukraine, Egypt and Oman have the value of RCA averagely along the year of

2003-2012 the highest with the value of 10.18 to 11.58 and the countries of Russia, Kuwait, Saudi

Arabia and Venezuela have the value of RCA of 4.37 to 4.95. While the position of Indonesia has

the value of RCA is of 2.07 above the value of RCA China, Malaysia, Iran and Canada.

Analysis of Competitive Advantage Analysis of competitive of the urea fertilizer industry of Indonesia is conducted using the approach

of Porter’s Diamond theory. According to Porter (1990) there are four main factors determining

the industrial competitiveness in a country namely condition of resource factor, demand condition,

condition of related industry with supporting industry, and condition of structure, competitiveness

and strategy of company.

Resource Factor Condition

Indonesia at the moment has the reserve of natural gas of 187.09 TSCF with the production rate

of 8.2 MMSCFD and this reserve suffices for 62 years ahead. The reserve of natural gas as the

urea raw material in the world is as 6,186 TSCF and that which is the biggest is in the area of

Russia with the total reserve of 1,680 TSCF or 27.16 % of the world reserve and the reserve of

natural gas owned by Indonesia is of 1.52 % (Fertecon, 2013). The data from Ministry of Industry





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are that the need of natural gas for the fertilizer industry of Indonesia in the year of 2012 is of 797

MMSCFD per day. The need of natural gas for the fertilizer industry in the coming year is

projected to increase of achieving 821 MMSCFD in 2015, 1,110 MMSCFD in the year of 2020

and 1,292 MMSCFD in the year of 2025. The need for fertilizer industry has been provided in

accord with the revitalization program of the fertilizer industry through the contract with the price

of $ 5.5-6.0/MMBTU.

The condition of resource factor fulfills the requirement in fulfilling the need of raw material of

urea fertilizer industry so that the domestic demand condition is quite sufficientwith the availabity

of natural gas raw material and the utility of factory maximally because of the availability of human

resource and technology resource. The condition of resource factor with the demand condition has

the supporting relatedness.

Demand Condition

The high domestic demand and urea export cause the big need of gas raw material, the thing causes

the increase of input which amongst all is the result of supporting industry and related industry.

The world urea need is increasing along with the increase of the consumption of the agricultural

product and the attempt to increase the agricultural product. The relatedness and supporting each

other among the demand condition and related industry and supporting industry are because of the

high demand of urea export in the international market causing the increase of the need of

production helper material produced by supporting industry and related industry. The increase of

income of the supporting industry and the related industry is determined by the condition of market

demand.

Condition of related Industry and supporting Industry

Related industry is the industry which is on the production system vertically. This industry starts

from the procurement of gas raw material, helper material, packing material to marketing. Besides

the related industry, there is also the supporting industry giving indirect contribution in the

production vertically. The existence of supporting industry and related industry having the global

competitiveness will influence the competitiveness of its main industry.

In the condition of related industry and supporting industry with competition, structure, and

strategy, there is the relatedness which is not supporting each other. This happens because there is

no direct contribution from related industry and supporting industry toward the creation of market

structure or the happening of market competition. The structure of urea market which is oligopoly

causes the supporting industry and the related industry facing the difficulty to increase the income

because of the limited demand.

Condition of Competition, Structure and Strategy

Urea production is prioritized to fulfill the domestic need for the agricultural sector (70 %) and the

rest for filling the export market. The domestic market structure is the monopoly and the export

market is in the structure of oligopoly market. The existing strategy to support the development of

fertilizer industry of Indonesia is :

1.Strategy for selling price regulation





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Domestic urea selling price regulation for subsidy urea is determined by Government through the

determination of sellingcost price in the level of retailer and the government also determines the

highest retailer price in the kiosk level. The difference between the selling cost price and the

highest retailer price is paid by the government to the fertilizer industry in form of fertilizer

subsudy. The role of government in determining the urea volume subsidized is very much

influencing how big is the profit of fertilizer industry. More and more big the volume for subsidy

the fertilizer industry is increasingly big to lose its chance to gain profit. For the selling price of

domestic non subsidy, the strategy used is referring to the international market p[rice with the

concept of war zone. With this strategy, the selling price follows the market price and gives the

margin contribution which is higher compared to the price set by the government. Likewise the

determination of selling price for export refers to the international market price with the priority

of destination country giving higher contribution of profit.

2. Distribution Strategy

Distributing of domestic subsidized urea is determined in the Rules of Trade Minister with the

least cost distribution and the administrative units pattern from each factory owned by the fertilizer

industry. The strategy of the distribution of non subsidized urea for export is done through the

plant having the port to serve the ship with the capacity above 10,000 ton namely the ports of

Bontang (East Kalimantan) and Gresik (East Java). The selling pattern is done with the transfer

requirement of FOB Plant.

3. Promotional Strategy

Through the product introduction promotion directly to the consumer in form of plot demonstration

as the entry mode is done to open the market. The industry of urea fertilizer has done this

promotion in Myanmar and Philippines. The information is also done through the electronic media

advertising, newspaper, international exhibition and seminar and membership in Association or

International Body of fertilizer producer. In the condition of resource factor also, there is

relatedness and supporting each other with the condition of competition, structure and strategy.

This is seen from the promotional strategy in the urea introducation as the element needed for

plants to increase the production.

Role of Government

Government plays important role in supporting the component in increasing the competitiveness

of urea fertlizer industry in Indonesia. The government support develops the fertilizer industry by

guaranteeing the availability of gas raw material and building the factory for replacing the factory

which has attained the age of more than 20 years to increase efficiency and increase the

competitiveness. The role of government to revitalize the fertilizer industry was determined in the

President Instruction No.2 2010 which instructed to the related Ministers, Governors, and Regents

to conduct the steps of revitalization of the fertilizer industry and to increase the competitiveness

of fertilizer industry. Instructing to the Minister of Energy and Mineral Resources to prioritize the

allocation of fulfillment of the need of natural gas for the raw material for fertilizer industry and

determining the price which is based on the result of agreement of the related institution.





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Role of Opportunity

The impact of role of opportunityis asymetry or only valid one way to the four main factors frojm

the theory of Diamond Porters.The opportunity factor is often something big outside the strength

of an industry in influencing the competitive advantage amongst all the political decisiona and the

patent right.

From the result of component analysis of Porter’s Diamond that the role of opportunity has a

supporting relatedness with the entire main components. The role of opportunity supports the

condition of resource factor namely the increasing of food need in line with the addition of people

is need the increase of food production which can be fulfilled with the availability of anorganic

(urea) fertilizer. The role of opportunity also supports the condition of related industry and

supporting industry which is shown with the increase of need of the gas raw material which

increases the performance of related industry and supporting industry. Likewise the role of

opportunity also supports the condition of demand factor along with the increase of food need will

increase the need of urea fertilizer to support the food production. The role of opportunity also

supports the condition factor of competition, structure and strategy where there is an opportunity

of fertilizer industry of Indonesia to control the market in Southeast Asia, East Asia, Latin America

and Australia because of the availability of sufficient goods continuously,since there is a support

from government.

Formulation of Competitiveness Strategy of Fertilizer Industry of Indonesia.

Analysis of Strategy with Matrix of SWOT Result of SWOT analysis for fertilizer industry 2012 can be described that the position of urea

fertilizer industry of Indonesia is on quadrant II (Stability) where the company has the big

opportunity and strength of marketbut on the other side it faces some constraints or internal

weaknesses. The focus of company’ stratetgy is to minimize the internal problems of company

(contract and price of gas raw material, revitalization for plant efficiency and the development of

technology) and to support the policy of aggresive growth (Growth Oriented Strategy) though the

strategy of market penetration by the opening of new market, market research and product

development. From the matrix SWOT, to determine the priority of strategy chosen so that it can

give the best alternative in increasing the competitiveness of urea industry of Indonesia done using

Analytic Network Process ( SWOT-ANP) as follows:

Internal

Strength (S)

- Plant is close to the

gas raw material (S1)

- Having the strategic

big port for export (S2)

- Having the sar dist (S3)

- Having 14factory (S4)

- Having HR having

skilland ability in the

Weakness (W)

- Price of gas is higher

than other country

(W1)

- In some factories, the

age and technology are

old so the efficient level

and the productivity are

low (2)





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External

field of fertilizer

industry (S5)

- Having the market

segment and the brand

image of good product

(S6)

- Production is prioritized

for domestic and the

rest for non subsidy

(W3)

- Operational cost in

USD and revenue in

Rupiah (W4)

Opportunity (O)

- Need/demand is quite big

(O1)

- Development in the

agricultural sector is

continued (O2)

- World urea price is

relatively good (O3)

- Government program for

revitalization of fertilizer

industry (O4)

- The availability of

technology of economical

energy (O5)

- The high trust of the 3rd

party for the project’s

funding (O6)

Strategy of S-O

- Optimalization of

factory in order the

production can reach

90 % for increasing

the competitiveness in

the global market.

- Development of

technology by

revitalization program

is finished right on time

to increase the value of

competitiveness.

Strategy of W-O

- Seeking the new gas

source.

- Revitalization of

fertilizer industry.

- Lessening the urea

allocation and it is

subtituted of NPK, to

increase of farmer

extension.

- The change of subsidy

regulation, the

calculation of allocation

volume.

-

Threat (T)

- Gas price tends to be up

and the payment with the

foreign exchange (T1)

- -Supply of natural gas for

limited contract for long

term (T2)

- Development of new

factory which is more

efficient abroad (T3)

- Certainty of volume for

PSO (T4)

- Margin for PSO to threat

the business activity of

company (T5)

Strategy of S-T

- Development of market

in the area of Australia,

US and Latin America

with the long term

contract directly to the

buyer abroad.

- Selling pattern of cfr to

destination country.

-

Strategy of W-T

- Increasing the

cooperative pattern with

other urea producer

countrythrough

promotion in the form

of demonstration plot

- Development of

information system of

market price.

Picture 3. SWOT Matrix Urea Industry





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Goal Determining the increase strategy of the competitiveness of urea

industry in the international market

Criteria Strengths, Weaknesses, Opportunities, Threats

Sub Criteria S1,S2,S3,S4,S5,S6,W1,W2,W3,W4,

O1,O2,O3,O4,O5,O6,T1,T2,T3,T4,T5

Alternative SO, WO, ST, WT

The

calculation result of SWOT-ANP seems that the biggest quality from the existing alternative is the

strategy of S-O namely the development of technology with the revitalization program will

increase the user efficiency of gas raw material and the optimization of factory so that it can

increase the value of competitiveness. The next order is the strategy of S-T namely the

development of export market by carrying out the selling or direct contract with buyer from abroad,

followed by W-O namely the change of subsidy regulaton of the calculation of allocation volume

and the strategy of W-T namely to increase the cooperative pattern with the other urea producer

country through promotion in form of demonstration plot. The prioritized quality obtained shows

the alternative interest chosen. With the biggest quality chosen to become the strategy which is the

most potential to be done.

Ideals Normals Raw

WO 0.702955 0.23311 0.029343

SO 1 0.331615 0.041743

ST 0.845798 0.2280479 0.035306

WT 0.466796 0.154796 0.019485

0

0.2

0.4

0.6

0.8

1

1.2

Bobo

t

Ranking Pembobotan Alternatif

Picture 4. Strategic alternative in SWOT-ANP

Competitiveness Model of Urea in the International Market

From the result of Depth Interview with the experts and the result of pairwaishing of opinion of

the experts, some analysis results are obtained as shown figure 5.





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Picture 5. Limiting Super Matrix ANP

Summarize into four implementation alternative strategies for urea industry using of

superdecisions software, the first priority was technology development and innovation of

produkcts (33,37 %), and the second was export market development and direct sales to the export

destination country (31,18 %), changes in the pattern of subsidy calculation (19,80 %) and business

communication by producing countries (16,69 %). From some elements of influence network

analyzed previously and the opinion analysis of experts, the competitiveness model of urea

industry on Indonesia is as shown in figure 6.

Picture 6. Competitiveness Model Urea Industri of Indonesia

in Internasional Market.





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STRATEGIC IMPLICATIONS

According to previous results and discussions, there are several steps that must be done in order

for urea industries in Indonesia to compete with other urea producing countries:

1. Technological developments by revitalization starting from 2013 to 2018 will hopefully

increase the production volume. By 2018, urea production will reach 8.925.000 ton and exports

will reach 2.455.00 ton, or in other words, there will be a 239% rise from 2012’s export. The

end of revitalization, natural gas consumption will be 27-28 ton urea. By 2018, Indonesia will

be the largest urea producer in Asia replacing China’s position. Other competing countries are

the Middle East; Saudi Arabia, Qatar, Oman, Iran, and Russia.

2. On the ANP construction model resulting several analysis from experts that are very to be

followed up. Priority elements that needs to be increased industrial competitiveness in urea

industries in Indonesia is the availability of natural gas as the main component for urea, the

implementation of direct export using Cost and Freight pattern for market development,

domestic consumption from China as world’s largest urea exporting country. The proposed

solution for these problematic elements is urea industry revitalization to the construction of

new plants, development of the market, revision of subsidies regulation, and expansion market

network to identify supplies condition from rival countries.

CONCLUSION AND RECOMMENDATIONS

From the analysis result which has been done about the increase strategy of competitiveness of

urea industry of Indonesia in the international market, it is result the basic conclusions in this

research as follows:

1. Urea industry of Indonesia has the comparative advantage, shown through the calculation of

the value of Revealed Comparative Advantage (RCA) which is more than one. In 2012, the

value of RCA Indonesia is of 2.28 which is the biggest from the urea export countries in Asia

and the biggest values of RCA is the countries of Middle East namely Qatar of 9.15 and Oman

of 8.01.

2. Urea industry of Indonesia has the competitive advantage seend from some factors of resource

condition through the availability of gas reserve as the urea raw material, the location of factory

which is close to the source of gas raw material, the experiencing manpower, having the market

segment and the product’s brand image which is good. The constraint factor from the increase

of competitiveness of fertilizer industry is the price of gas raw material which is relatively more

expensive than the other urea producer countries, some of factories have been old so that the

use of gas raw material are inefficient and the production is still prioritized for subsidy.





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3. Strategy to increase the competitiveness of urea industry of Indonesia in the international

marketis the development of factory technology, the development of exported market, the

change of subsidy calculation pattern and to conduct the effective business communication with

urea exporter countries.

SUGGESTION AND RECOMMENDATION

In general from the result of research after conducted the indepth analysis by paying attention to

the results of opinion of the experts, it can be suggested the things as follows:

1. From the production side, the urea industry in Indonesia needs to continues the plant

revitalization to change or rejuvenate the plant which in general have been old and inefficient

in the use of gas . To build the new plant in the location which is close to the source of raw

material by making an attempt for gas availability for the long term contract.

2. Development of technology for the alternative substitution of gas from the gasification process

of coal, for this program it is necessary to condut the special study about the technology

development of coal gasification by studying from China which has used to this technology.

3. After finishing the development of the plant rejuvenation in 2018, the production will be up so

it is necessary to anticipate to the market development by doing the direct long term contract

with the buyer which has mastered the distribution network in the country. The price uses the

formula based on the international price in each region.

4. For expanding the marketing network and the market intelligent, it is necessary to do the

business communication with the business actor in the urea importer countries in South Asia,

Australia, United States of America and the countries of Latin America.

5. If having been available the quantitative data among urea exporter countries needed to do the

analysis about the comparison of competitiveness has been equipped, it is necessary to do the

further quantitative research.

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